reports
- Philip Gorham
Trends Unchanged for Nestle in 2Q; Shares Fairly Valued
Nestle remains on track to meet our full-year forecast of almost 2% reported sales growth after a second quarter in which trends remained unchanged from the first quarter. We are unlikely to alter our CHF 79 fair value estimate by more than the impact of the time value of money, and we currently consider Nestle to be fairly valued. Although Nestle appears to be suffering from the low-growth environment more than most of its peers, the company's wide economic moat is based on its supply-chain ent...
- Philip Gorham
Nestle's Acquisition of Starbucks' Consumer Products Valuation-Neutral
Nestle's acquisition of Starbucks' consumer product range, which includes the portfolio of soluble, roast and ground, and capsule coffee, as well as Teavana tea, is strategically a net positive in our view, but neutral to our valuation. We intend to update our model after the analyst call but do not expect to change our CHF 79 fair value estimate or our wide moat rating. We think Nestle's market value offers limited upside to its intrinsic value, particularly after the recent pullback across the...
- Philip Gorham
- CFA
- FRM
Nestle On Course for Another Subpar Year; Shares Fairly Valued After P...
Nestle is bang on track to meet our full-year forecast of 1.5% reported sales growth after a tepid first quarter. We reiterate our CHF 79 fair value estimate. We believe that the pullback in the stock since the turn of the year has been justified and that shares offer only very modest upside from current levels. Although Nestle appears to be suffering from the low-growth environment more than most of its peers, the company's wide economic moat is based on its supply-chain entrenchment, rather th...
- Philip Gorham
- CFA
- FRM
Sluggish fourth-quarter organic growth underlines Nestle's need for se...
Nestle missed our revenue estimates in the fourth quarter as growth slowed further, but strong execution on cost savings more than made up for the shortfall, and we do not expect to change our fair value estimate by more than the impact of the time value of money. Although Nestle appears to be suffering from the low-growth environment more than most of its peers, the company's wide economic moat is based on its supply-chain entrenchment, rather than brand equity, so while weak pricing is not ent...
- Philip Gorham
- CFA
- FRM
Nestle Receives a Generous Multiple for U.S. Confectionery but More Wo...
Although Nestle's disposal of its U.S. confectionery business to Ferrero for $2.8 billion in cash represents decent value for its shareholders, the deal does not impact our CHF 79 valuation. We view this deal as one of the first steps in a strategy to position the company in categories that will deliver higher long-term returns on capital. We are reiterating our wide moat rating because this deal does not change Nestle's highly entrenched position in its supply chain due to its broad portfolio a...
- Philip Gorham
- CFA
- FRM
3Q Shows the Good and the Bad of Nestle; Shares Slightly Overvalued
The good news from Nestle's third-quarter sales update was that the firm is bang on track to meet our organic sales growth estimates this year. The bad news is that those estimates remain well below the performance level we think the business is capable of in the medium term. Nestle has a wide economic moat based on significant scale and supply-chain advantages it holds over new entrants, and this was evident in the reasonable 1.8% organic volume growth achieved in the third quarter. However, we...
- Philip Gorham
- CFA
- FRM
Nestle Throws a Bone to the Activists at Investor Seminar, but Change ...
Nestle did enough to keep the barbarians from the gate at its much-anticipated Investor Seminar. The event highlighted the company's enormous strengths and its significant challenges, in our opinion. We were slightly disappointed that management did not address our concerns over the structure and culture of the organization, but the new medium-term financial targets are in line with our base-case forecasts, and we are reiterating our CHF 79 fair value estimate. We are encouraged by the commentar...
- Philip Gorham
- CFA
- FRM
Nestle's wide moat should foster stability in this low-growth competit...
Nestle reported another sluggish performance in the second quarter, with sales in line with our forecast but margins slightly below. These results enhance our conviction that our short-term forecasts are reasonable and that our long-term thesis of structurally slower organic growth is intact; we think this performance will give voice to those clamouring for change at Nestle. We still believe Nestle has a wide economic moat, with structural advantages in defending its shelf space, but we suspect ...
- Philip Gorham
- CFA
- FRM
Nestle’s First Half in Line and Continues to Reflect Weaker Pricing;...
Nestle reported another sluggish performance in the second quarter, with sales in line with our forecast but margins slightly below. These results enhance our conviction that our short-term forecasts are reasonable and that our long-term thesis of structurally slower organic growth is intact; we think this performance will give voice to those clamouring for change at Nestle. We still believe Nestle has a wide economic moat, with structural advantages in defending its shelf space, but we suspect ...
- Philip Gorham
- CFA
- FRM
Nestle Provides Underwhelming Response to Investment by Third Point
Nestle may have woken up, but we are not convinced the company has smelt the coffee with regard to the actions it needs to take to reignite growth in the increasingly competitive packaged food industry. We think our assumptions around the company's algorithm are appropriate, and we are reiterating our CHF 79 fair value estimate. While it is possible that the company's announced measures succeed in reaccelerating growth, we think the changes revealed today fall short of the measures we think are ...
- Philip Gorham
- CFA
- FRM
What Took the Activists So Long? Size No Longer a Barrier to Waking Ne...
Nestle has become the latest consumer staples manufacturer to be in the crosshairs of activist investors, and we see several avenues for financial and operational improvement. We are maintaining our CHF 79 fair value estimate until management reveals an action plan in response to the $3.5 billion/1.25% stake taken by Third Point Capital, and the hedge fund's demands for capital-allocation improvements. For all its recent underperformance, we still regard Nestle as having a wide economic moat, an...
- Philip Gorham
- CFA
- FRM
Review of U.S. Confectionery Business Marks Beginning of Evolution in ...
We think Nestle's announcement it is to undertake a strategic review of its U.S. confectionery business is more significant for its implications regarding a potential portfolio realignment than it is for its financial significance. We are reiterating both our wide moat rating and our CHF 79 fair value estimate for the ordinary shares. Nestle will remain a highly entrenched consumer product manufacturer in the U.S., even if it disposes of this unit, because its portfolio will remain very broad an...
- Philip Gorham
- CFA
- FRM
Nestle’s 1Q Reaffirms Our Thesis of Weaker Structural Growth; Shares...
We reiterate our CHF 79 fair value estimate and wide moat rating for Nestle, despite the firm's underwhelming first-quarter sales update. Organic growth of 2.3% is below our full-year forecast, but that is to be expected, given the greater number of selling days a year ago and the later timing of Easter this year. Nevertheless, the current growth rate is a sequential slowdown from last year's 3.2% growth and is far short of the old “Nestle model†of 5%-6% growth, underlining our thesis that ...
- Philip Gorham
- CFA
- FRM
Nestle's wide moat should foster stability in this low-growth competit...
Nestle’s disappointing organic growth in 2016 is in line with our thesis that packaged-food companies are likely to suffer from muted price/mix for the foreseeable future. Although reported growth narrowly missed our forecast, and guidance of 2%-4% organic growth in 2017 is below our current forecasts, the impact of dampening our near-term forecasts is likely to be mitigated by the time value of money, and we do not expect material changes to our CHF 79 fair value estimate. We are reiterating ...
- Philip Gorham
- CFA
- FRM
Nestle's wide moat should foster stability in this low-growth competit...
Nestle’s disappointing organic growth in 2016 is in line with our thesis that packaged-food companies are likely to suffer from muted price/mix for the foreseeable future. Although reported growth narrowly missed our forecast, and guidance of 2%-4% organic growth in 2017 is below our current forecasts, the impact of dampening our near-term forecasts is likely to be mitigated by the time value of money, and we do not expect material changes to our CHF 79 fair value estimate. We are reiterating ...
- Philip Gorham
- CFA
- FRM
Anaemic Price/Mix Confirms Our Thesis of Nestle’s Slowing Growth
Nestle’s disappointing organic growth in 2016 is in line with our thesis that packaged-food companies are likely to suffer from muted price/mix for the foreseeable future. Although reported growth narrowly missed our forecast, and guidance of 2%-4% organic growth in 2017 is below our current forecasts, the impact of dampening our near-term forecasts is likely to be mitigated by the time value of money, and we do not expect material changes to our CHF 79 fair value estimate. We are reiterating ...
- Philip Gorham
- CFA
- FRM
Pressure Remains on Nestle's Top Line, but Shares Offer Modest Upside
After nine months of the year, Nestle is exactly in line with our full-year 2016 revenue growth forecast of just over 1%. We are maintaining our CHF 79 fair value estimate for the ordinary shares, but we are lowering our valuation of the ADRs to $81 from $83 to account for the modest depreciation in the Swiss franc against the U.S. dollar since our previous update. These results demonstrate that organic growth remains well below historical levels, lending support to our thesis that Nestle's hist...
- Philip Gorham
- CFA
- FRM
Nestle Reports In-Line First Half; Shares Fairly Valued Amid Underwhel...
Nestle's first-half results were in line with our forecasts from an operating perspective, although some below-the-line items caused the firm to miss our half-year earnings expectations. We are maintaining our CHF 79 fair value estimate for the ordinary shares, but we are raising our valuation of the ADRs to $83 from $81 to account for the modest appreciation in the Swiss franc against the U.S. dollar since our previous update. These results demonstrate that organic growth remains well below his...
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